Crude oil futures settled modestly higher near $100 a barrel Friday, after a volatile session sparked by sharp moves in the dollar and euro.
After a week-long selloff, crude regained some footing near $100 a barrel, but failed to settle above that level for a third day straight. That's the longest string of sub-$100 settlements since March 1.
The market danced to the tune emanating from the exchange market, as the euro climbed early on news that first-quarter gross domestic product rose 2.5% in the eurozone economies, compared with expectations of a 2.2% gain. A weaker dollar makes crude and other dollar-denominated commodities cheaper for some overseas investors. But lingering worries about sovereign debt gave the dollar room to rebound, forcing oil down to $97 near midday.
The European Union and International Monetary Fund, backed by the German government, are ready to accept a "soft" debt restructuring by Greece after acknowledging that its rescue plan isn't working, according to the German newspaper "Die Welt." But any such step still faces stiff opposition from France and from the leadership of the European Central Bank, meaning the issue may continue to grab market headlines.
Concerns over the potential impact on oil supplies from Mississippi River flooding touched off late buying ahead of the weekend, too, traders said. Some pipelines and terminals have been shutdown.
Light, sweet crude oil futures for June delivery settled 68 cents higher at $99.65 a barrel. The modest 2.5% week-to-week rise, the most in a month, belied the $9.35 a barrel intraday trading range in the week. In the first two weeks of May, crude has traded in a $20.20 range amid fears that high prices are hurting demand.
ICE Brent crude for June settled up 85 cents at $113.83 a barrel ahead of its expiration at Monday's settlement.
Some traders said crude may consolidate near $100 while the market assesses the next step.
Pete Donovan, vice president at Vantage Trading, said "from a supply and demand view, it doesn't justify moving higher." U.S. crude stocks are at the highest levels in two years, while refiners are operating at 16-year lows for this time of year. With retail gasoline prices near $4 a gallon--the most since record highs in summer 2008--demand dropped to a nine-year low for the first week of May, government data show.
Reformulated gasoline blendstock futures have fallen nearly 40 cents a gallon since the end of April, as concerns over weak demand are deepening.
The International Energy Agency this week cut its global demand growth forecast for 2011 by 190,000 barrels a day, largely on a drop in U.S. gasoline demand. The IEA warned of an "anemic driving season," with spring-summer peak demand 2% below a year ago.
Regular gasoline at the pump averaged $3.982 a gallon on Friday, little changed from a week ago, according to AAA Daily Fuel Gauge Report. The average for futures prices so far in May suggests prices may be headed down to below $3.90 a barrel.
But traders said the near-term outlook will be set by how refiners bear up against the impacts of the Mississippi flooding. Lawrence Eagles, at J.P. Morgan said 13 refineries have the potential to be impacted, as well as numerous petrochemical facilities and product terminals. Over 2.6 mbd of capacity could be affected in some manner, accounting for over 15% of the operable capacity in the U.S. He said the risk of disruption extends beyond refiners in the immediate flood path. "A more likely risk is that refineries will not be able to get enough crude supplied or products to the market, leading to run cuts to manage inventories," he said.
June reformulated gasoline blendstock futures settled 1.05 cents higher at $3.0744 a gallon. The contract ended just 1.6 cents lower in the week, despite a huge mid-week drop of more than 25 cents a gallon which triggered the first trading halt in petroleum contracts since September 2008.
June heating oil futures settled 2.85 cents higher at $2.9422 a gallon.